10 reasons to invest in ethiopia

8/8/2019 10 Reasons to Invest in Ethiopia

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INVESTING IN ETHIOPIA:10 REASONS TO INVEST IN ETHIOPIA

1. Stable Economic Environment: Ethiopia has been able to achieve macro-economicstability Stable annual economic growth in double digits since2003

Stable exchange rate Government commitment to private sector Safe and secure working and living environments,

identified by the U.N. and the International Chamber ofCommerce (ICC) as key assets for investors in Ethiopia Absence of corruption - Ethiopia is described by the U.N.and ICC as exceptionalin its almost complete absence

of routine corruption.

2. Liberalized Economy: All major economic sectors are liberalized for investmentand marketing Remittance out of Ethiopia from invested capital

(dividends and interest) is permitted Remittance also permitted for principal and interestpayment on external loans, payments associated with

technology transfer, proceeds from sales or liquidation ofan enterprise, salaries and other payments 100% foreign ownership of investment is permitted.$100,000 minimum initial investment required from

foreign investors to start a business, reducing to $60,000

where the foreign investor is in a joint venture with adomestic partner ($50,000 for consultancy or publishing

business). This figure reduces to $25,000 (in cash or in kind)for foreign investors working in partnership with adomestic investor in the areas of engineering,accountancy, architecture, auditing services or

business/management consultancy.

3. Security of Investment: Government guarantees (Investment Code 1991) andconstitutional protection from expropriation Ethiopia is a signatory to the main international

investment related institutions, for example, it is a Memberof the Multilateral Investment Guarantee Agency (MIGA) Ethiopia is also a signatory of the Convention on the

Settlement of Investment Disputes between States andNationals of Other States Professional one-stop-shop for foreign investmentthrough the Ethiopian Investment Agency (EIA)

4. Significant Tax Incentives: Customs Import Duty - 100% exemption on all import ofinvestment capital goods (plant machinery, construction

materials, etc.) including spare parts worth up to 15% ofthe imported investment capital goods; plus exemption fo

import of raw materials needed for the production ofexport goods Export Customs Duty - Products and services developedin Ethiopia are exempt from export tax

5. Conducive Tax Environment: Corporate income tax (tax on profit) is 30% Excise tax is levied (minimum 10%) on selected local orimported products

Turnover tax at 2% for priority sectors such as tractors,combine harvesting, grain mill etc. and 10% on othersectors

Customs duty on unexempted imports ranges from 0 to35% Income tax ranges from 10 to 35% on monthly income o$16.50 and above Withholding tax is payable on imports at 3% of cost,

insurance and freight 15% VAT is payable on businesses with a turnover above$54,000

Dividend tax (on income derived from dividends from ashare company or withdrawals of profits from a privatelimited company) at 10% Royalty tax (on income derived from technology and

intellectual property rights) at 5% Capital gains tax - share of companies 30%; business,factory or office buildings 15%; residences 0%

Rental income tax (on annual rental income) between 0and 35% dependent on level of rental income Stamp duty - Leasing 0.5% of value; registering title toproperty 2% of value; contract of employment 1% salary;

bonds 1% of value, etc. Tax treaties to avoid double tax payment are signed withseveral countries, along with bilateral treaties for theprotection and promotion of investments


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6. Investment Opportunities:

Agriculture and Agro-processing - New private

investment is sought in the production and processing

of agricultural crops such as coffee (the country's

single most important cash crop), tea, sugar, flowers,fruits and vegetables, teff, wheat, maize, beans, peas,

lentils, soybeans, chickpeas, starch production, oil

crops such as rapeseed, linseed, groundnuts, sunflower,

sesame, maize, Niger seed and cotton seed, as well as

investment opportunities for introducing modern

commercial livestock breeding and processing into

the largest livestock population in Africa (cattle, sheep

and goats), plus significant fresh water fishery and

livestock resources. Investment is also required in the

provision of agricultural support services such as pestand disease control, agricultural machinery, cold

storage, etc. A number of crops are grown

organically.

Textiles - Opportunities for production and

processing of cotton in Ethiopia, as well as producing

and finishing textile fabrics and garment production

Leather and Hide - Opportunities for investment in

tanning up to finishing, manufacture of luggage items,

handbags, saddlery and harness items, footwear,

garment and other leather goods

Horticulture/cut flowers - fruit, vegetable and cutflowers are fast-growing export businesses, with great

potential for private investment. There are already

some integrated agro-industrial processing plants.

Building materials - Manufacture of cement, lime,

gypsum, marble, granite, limestone, ceramics, etc.

Tourism - Untapped tourism potential, particularly in

the historic Northern route, with investment

opportunities in hotels, lodges and international

restaurants. Historic sites include the old capital of

Gondar with its castles, the city of Lalibela and the

island monasteries of Lake Tana.

Privatization - 111 state-owned enterprises identified

for privatization, with 43 state-owned enterprises

already in the pipeline, mainly in the manufacturing,

construction, agriculture/agro-industry, hotels,

transport, trade and mining sectors.

INVESTING IN ETHIOPI

7. Strong Market with Excellent Market

Access:

Strong internal market with second largest

population in Sub-Saharan Africa at 75 million (July2006)

Located in the Horn of Africa at the crossroads

between Africa, the Middle East and Asia, within eas

reach of the major ports of the Horn

Membership of the Common Market for Eastern an

Southern Africa (COMESA) embracing 23 countries

with a population more than 300 million. Ethiopia

enjoys the benefits of preferential tariff rates on

exports to these countries.

Ethiopia is an ACP member (African, Caribbean and

Pacific Group) and accession to the WTO is undernegotiation.

Duty and quota free access into the U.S. (AGOA) an

EU (EBA) markets. Export products from Ethiopia to t

EU market are entitled to duty reductions or

exemptions and are free from all quota restrictions

under the terms of the Lome Convention. The trade

preference accorded Ethiopia includes duty free ent

of all industrial manufactured products. Under the

generalized system of preferences (GSP), a wide rang

of Ethiopia's manufactured products are entitled topreferential duty treatment in the United States,

Canada, Japan and most EU countries.

The large and fast growing domestic market offers

good prospects for investment in and the

development of consumer goods industries such as

food, beverages, tobacco, plastic products, soap and

detergents, drugs and pharmaceuticals, paper and

paper products and electrical and electronic

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8. Strong Natural Resource Base:

Good rainfall, rich soils, and favorable temperatureranges. Climate is identified by the U.N. and ICC asexceptional offering an excellent environment forvarious agricultural activities. Unexploited mineral deposits, specifically gold,

tantalum, platinum, nickel, potash and soda ash Urban and rural land available on a leasehold basis.Lease rights over land can be transferred, mortgagedor sub-leased together with on-build facilities.Leaseholders have the right to use urban land for upto 60 years in Addis Ababa and up to 80 years in othersmaller towns, with leasehold renewal permitted(generally the range in the country is between 50-99

years depending on purpose and location).9. Trainable Labor:

Ethiopia presently turns out more than 10,000university graduates per year, including business,management, economics, accounting, law andengineering graduates 151 technical and vocational education and trainingschools in Ethiopia Private universities and colleges flourishing in Addisand regional cities

The average private sector wage is about $25 permonth, with graduate salaries ranging fromapproximately $85 to $105. Expatriate employees permitted in senior positions,with prior consent from the Ethiopian InvestmentCommission (where employer is sole or major owneror shareholder of enterprise). Expatriate experts arealso permitted, as long as the investor trains his/herreplacement within a designated time period.

Good standards of spoken and written English

10 REASONS TO INVEST IN ETHIOPIA

10. Good Infrastructure Standards:

Air Transport: Three international and 18 domesticairports, with international flight links to over 45cities on four continents (12 in Africa, 12 in Asia, five Europe and two in North America), and domestic linto 26 destinations The national airline Ethiopian Airlines has anoutstanding safety record and modern fleet. Modern air cargo terminal and maintenance hanga

in Addis soon to be completed Road Transport: Investment in road infrastructure ahigh priority, with an expanding road network andinternational highways linking Ethiopia with itsneighbors

Railways and Ports: 500 mile rail service linking Addto the port of Djibouti (on the Red Sea coast) via theeastern cities of Dire Dawa and Nazareth. Ethiopia al

has access to Berbera in the East and Mombassa inthe south. Telecoms: Microwave links connect all regional citieand a number of smaller towns have automatictelephone services. International communicationslinks are maintained through two satellite earthstations, providing telephone, internet, telex, fax and

TV services. Microwave links exist with Kenya, Djibou

and the Sudan. Power Supply: Ethiopia has vast hydropower andpromising geothermal energy resources, with ninehydro-electric power plants. To date, the aggregateelectricity generated is less than 2% of the potential,and developing this area is a Government focus.

The main industrial towns are all connected to thenational grid, and electricity is relatively cheap. TheGovernment has liberalized the sector, allowing

foreign investors to participate in generating electric

power by setting up hydroelectric power plants,although national grid transmission and distributionremains with the state-owned Ethiopian ElectricPower Corporation.

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Many companies have had successful experiences in Ethiopia, after making the decision to invest:

Unilever returned to Ethiopia in 2000 after a longish hiatus, having decided that we would capture a larger

share of the local market by being on shore and building a manufacturing base than by staying off shore and

relying on imports. The changes we have seen in the last couple of years, in such things as the speed of

approval by the EIC, tell us that we made the right decision. The size of the population alone gives Ethiopiamarket potential but it is the changes in the business climate that suggest that the potential might actually be

realized."

Richard Ponsford, Managing Director, Unilever Ethiopia PLC

MIDROC Ethiopia is proud to be the largest foreign investor in Ethiopiaa country with a huge and trainable

workforce, a wonderful climate and almost no corruption. The current political environment is also very

hospitable to investors. Once the world knows that there is untapped investment potential, as well as

continuous improvement in incentives and governance, we are bound to see more DFI in this beautiful

country. MIDROC would certainly welcome it."

Arega Yirdaw, Chief Executive Officer, MIDROC Ethiopia

"When we decided to come to Ethiopia in 1998, it was because of its natural advantages in particular its

climate, which was ideal for growing roses. We are delighted that now, in 2004, the natural advantages are

beginning to be matched by man-made ones, those deriving from improvements in policies and procedures.

these improvements can be sustained, there is almost no limit to investment opportunities in Ethiopia."

Ryaz Shamji, General Manger, Golden Rose Agrofarms Limited

"During my two years in Ethiopia, I have seen great progress towards good governance and economic

liberalization. Although a lot remains to be done, the path is now set. And all this has been done during a

severe drought, which absorbed a tremendous amount of energy and resources. Even though purchasing

power is still very low, our principals believe strongly in the future potential of this huge market of 70million."

Chris De Muynck, Managing Director, MOENCO S.C

"We believe that this is exactly the time to invest in the garment business in Ethiopia. Not only are labor costs

low and the workforce trainable, access to major markets like the U.S. and the EU is available on preferential

terms. What's more, the investment climate has improved notably in the past year or so. Our own recent

experience has been positive enough to lead us to expand our garment business (tripling employment) and

setting up a related dyeing and knitting venture with two other foreign investors."

Worku Zewde, Managing Director, Garment Express Private Limited

For further information or to arrange a meeting to discuss existing investment opportunitiesin Ethiopia in more detail, please contact:

Embassy of Ethiopia

Economy and Business Section

3506 International Drive N.W.

Washington, D.C. 20008

Tel-202-364-6385; Fax-202-587-0195

[email protected]

www.ethiopianembassy.org

NVESTING IN ETHIOPIA: SUCCESS STORIES

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10 reasons to invest in ethiopia

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